Procession for James MacNeill, as new Governor General, 1 February 1928

In office, McNeill clashed with the King's Private Secretary when he insisted on following the constitutional advice of his Irish ministers, rather than that of the Palace, in procedures relating to the receipt of Letters of Credence accrediting ambassadors to the King in Ireland. He also refused to attend ceremonies in Trinity College, Dublin, when some elements in the college tried to ensure that the old British national anthemGod Save the King was played, rather than the new Irish anthem, Amhrán na bhFiann.

When Éamon de Valera was nominated as President of the Executive Council in 1932, McNeill opted to travel to Leinster House, the parliament buildings, to appoint de Valera, rather than to require that he go to the Viceregal Lodge, the Governor-General's residence and the former seat of British Lords Lieutenants, to avoid embarrassing de Valera, who was a republican. However, McNeill's tact was not reciprocated by de Valera's government, and some of its ministers sought to humiliate McNeill as the King's representative by withdrawing the Irish Army's band from playing at functions he attended and demanding he withdraw invitations to visitors to meet him. In one notorious incident, two ministers, Seán T. O'Kelly and Frank Aiken, publicly stormed out of a diplomatic function when McNeill, there as the guest of the French ambassador, arrived. In a fury, McNeill wrote to de Valera demanding an apology for this treatment. When none was forthcoming, apart from an ambiguous message from de Valera that could be interpreted as partially blaming McNeill for attending functions at which ministers would be present, he published his correspondence with de Valera, even though de Valera had formally advised him not to do so. De Valera then demanded that George V dismiss McNeill.

The King however engineered a compromise, whereby de Valera withdrew his dismissal request and McNeill, who was due to retire at the end of 1932, would bring forward his retirement date. McNeill, at the King's request, resigned on 1 November 1932.

James McNeill died in 1938 at the age of 69 in London. McNeill's widow Josephine was appointed Minister to the Hague by Seán MacBride, Minister for External Affairs in the coalition government of 1948.